Is your firm one that commands top fees and thrives, or one that will struggle to compete and keep up?
As I have stated many times before, I’ve spent my entire 45 year post-graduate school career working in and around AEC firms. Big ones, small ones, all disciplines, growing and declining, profitable and unprofitable – I have worked for, worked in, been an owner, been on the board, and observed from afar all of these. And just this morning I had an epiphany. You can put these firms into one of two buckets. Those that get it when it comes to how to have really good fees and those that don’t.
The firms that “get it” make a lot of money. They are very profitable. They pay their owners and employees better than the typical firm in this business. Their owners are happier and their employees are, too. There is less chaos and less panic. You can feel it the moment you step into one of these company’s offices. They are just more successful.
The question is, “How did they get there?” There definitely are common traits one could point to. Some of these include:
- They have owners who expect to be successful. This is such a big part of it – owners who see nothing wrong with making money in this business and haven’t been warped into thinking it takes a vow of poverty to be in it. My personal anecdotal experience says even these people tend to fall into two pots – those who grew up in affluent families where they were simply expected to do well, and those who grew up with little to nothing and don’t ever want to live like that as adults.
- They are specialized. Specialization not only allows you to charge more but it also helps loosen up the geographic ties that come from being one of many. Contrary to conventional wisdom, specialization is less risky than trying to do everything for everyone. Generalist firms are never the ones getting the best fees. And you don’t have to specialize in only one thing. You can be a multi-speciality firm as you get larger.
- They pay a lot of attention to marketing and brand-building. Coca-Cola sells far more Coke products at higher prices than generic cola makers do. Why is that? Is it all because the product is better? No. It is because they have consistently outspent their competitors on marketing and advertising, and the payoff from that investment has been enormous. The same strategy works in the AEC business. But it is easier to implement here because we can identify our target clients and hammer just on them versus having to advertise to the entire world. Real “brands” in the AEC world can charge more for what they do because the risk on the part of the client for hiring them is reduced.
- They drive demand for what they do beyond their ability to supply it. This is key. Always be somewhat understaffed so the salaried people work 44-46 hours a week on average and always outspend your peer companies on marketing by 50 percent to 100 percent and you have the basic formula for doing this. When demand exceeds supply, there’s no reason to get beaten down on your fee, and you don’t work for unappreciative clients or those who don’t pay their bills, either. You don’t need the work.
- They have a very clear organization and leadership structure that is respected by all. Everyone has one and only one supervisor and they each know who that is. There are fewer meetings and committees. Decisions get made faster. Principals aren’t regularly crossing into territories that are not their domains. This minimizes conflict and keeps the attention on the clients versus internal stuff – and that helps get better fees.
- They treat their business people as equals to their design and technical staff. Sure – you may be in the architecture, engineering, planning, land surveying, interior design, or environmental consulting business, and that is the core of what you get paid by clients to do, but that does not mean that finance, accounting, IT, marketing, business development, HR and other non-line functions are not equally important. The most successful firms understand this and don’t treat those people like second class citizens. As a group of companies we have gotten better about this over time, but poorer-performing firms still treat non-design or non-technical people differently from the rest and it’s not the way to have a successful business.
- There is someone in the company at a high level who can advance long-term initiatives that improve the business. These companies that can charge more and make more than their peers have someone in the company who is getting the big systems projects inside the firm done. Like implementation of a new accounting system, or a new CRM, or a new intranet that actually works. These initiatives have to be driven by someone who takes them all the way through to completion or the company will essentially be stuck. That means you can be more efficient and have more time to do a great job for your clients and get better fees.
- They have high standards of excellence for all of their people. That means if you work there you are expected to look good, be available, be responsive, be an effective written and verbal communicator, and work well with other people. These are “musts” and not optional for those who are good designers or engineers but cannot master the requisite “soft skills.” It helps you get better fees when your people are clearly “better.”
So I guess the important question is which one of these two buckets would your firm fall into? Are you consistently punching above your weight class and getting better fees than the “other guy (or gal)?” Do you sound like the companies I described above, or do you have some work to do to get there? It might be time to make some changes so you, too, can rise to the top!
Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.